Institution Decision Not Carved in Stone; Final Written Decision Can Differ

In Fanduel, Inc. v. Interactive Games LLC, [2019-1393] (July 29. 2020), the Federal Circuit affirmed the PTAB’s determination that Fanduel, had failed to prove that claim 6 of U.S. Patent No. 8,771,058 was obvious in view of the asserted prior art.  Fanduel argued that the Board violated the APA by adopting in its final written decision a “new theory”—that the combination of Walker, Carter, and the Slot Payouts Webpage failed to disclose the claimed combination, after instituting on that ground.

The Federal Circuit said that the critical question for compliance with the APA and due process is whether patent owner received adequate notice of the issues that would be considered, and ultimately resolved, at that hearing.  The Federal Circuit added that FanDuel’s argument that it lacked notice that the Board might address and reject the obviousness arguments made in FanDuel’s own petition strains credulity.

Moreover, the Federal Circuit failed to see how the Board changed theories at all in this case. The Federal Circuit said that by finding at institution that Fan-Duel had a reasonable likelihood of succeeding in its obviousness challenge to claim 6, despite one reference’s contested prior art status, the Board was not adopting a position on the ultimate import of the three references. The Federal Circuit said that the Board said nothing in its institution decision endorsing FanDuel’s arguments such that later rejecting these arguments would have been a change in theory.

The Federal Circuit said that there is nothing inherently inconsistent about the Board instituting IPR on obviousness grounds and then ultimately finding that the petitioner did not provide preponderant evidence that the challenged claim was obvious. The Federal Circuit observed that this happens with some frequency, and that is has encouraged the Board to “change its view of the merits after further development of the record, if convinced its initial inclinations were wrong.

The Federal Circuit also rejected FanDuel’s suggestion that the patent owner’s failure to put forth rebuttal evidence regarding the substance of the references’ disclosures in any way limited the Board’s ability to decide for itself what the references would teach or suggest to a person of skill in the art.  The Federal Circuit noted that the Petitioner always has the burden of showing invalidity, and that the patent owner does not even have to file a response, and thus, a patent owner’s response, alone, does not define the universe of issues the Board may address in its final written decision.

The Federal Circuit concluded that from the moment FanDuel filed its petition, it was on notice that the Board would decide whether those references taught what FanDuel claimed they taught. That is exactly what the Board ultimately did. No APA violation results from such a course.  The Board’s purported new theory in this case was merely an assessment of the arguments and evidence Fan-Duel put forth in its petition.

On the substantive issues, the Federal Circuit agreed with Board that FanDuel failed to show that claim 6 was obvious.

Patent Owner is Not Always Indispensable

In Gensetix,Inc. v. Baylor College of Medicine, [2019-1424] (July 24, 2020), the Federal Circuit affirmed-in-part, reversed-in-part, and remanded  the dismissal of the suit for failure to join an indispensable party.

Gensetix, Inc. , exclusively licensed U.S. Patent Nos. 8,728,806 and 9,333,248 from the University of Texas, an arm of the state of Texas. Gensetix brought suit, naming the University of Texas as an involuntary plaintiff. The district court determined that the Eleventh Amendment barred joinder of UT as an involuntary plaintiff, and concluded that the suit could not proceed in UT’s absence.

The Federal Circuit agreed that sovereign immunity prevented UT from being joined as an involuntary plaintiff, noting that sovereign immunity is reflected in (rather than created by) the Eleventh Amendment, and transcends the narrow text of the Amendment itself. Sovereign immunity serves to avoid the indignity of subjecting a State to the coercive process of judicial tribunals at the instance of private parties. The Federal Circuit distinguished cases where the state is the plaintiff, noting that the Eleventh Amendment applies to suits against a state, not suits by a state. Thus, the fact that UT did not voluntarily invoke federal court jurisdiction was dispositive. Accordingly, Rule 19(a)(2) cannot be used to drag an unwilling UT into federal court.

However, the Federal Circuit found that the district court abused its discretion when it dismissed the suit because of the absence of UT. Rule 19(b) provides that, where joinder of a required party is not feasible, “the court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed.” Fed. R. Civ. P. 19(b). This inquiry involves consideration of four factors: (1) the extent to which a judgment rendered might prejudice the missing required party or the existing par-ties; (2) the extent to which any prejudice could be lessened or avoided (3) whether a judgment rendered in the required party’s absence would be adequate; and (4) whether the plaintiff would have an adequate remedy if the action were dismissed for nonjoinder.

The district court found that three out of the four Rule 19(b) factors weighed in favor of dismissing the case. However, the Federal Circuit concluded that the district court abused its discretion by collapsing the multi-factorial Rule 19(b) inquiry into one dispositive fact: UT’s status as a sovereign.

The Federal Circuit said that the proper analysis of the Rule 19(b) factors is far more nuanced than the district court’s. As to the prejudice to UT, the interests of UT and Gensetix are aligned. Despite UT’s sovereign status, given Gensetix’s identical interest in the validity of the patents-in-suit, any prejudice to UT is greatly reduced. There is also no risk of multiple suits be-cause, under the express terms of the parties’ agreement, UT may not sue Baylor once Gensetix has commenced liti-gation. And, as an exclusive licensee with less than all sub-stantial rights in the patents-in-suit, Gensetix cannot enforce its patent rights without the court allowing the suit to proceed in UT’s absence. Given this clear factual record, we conclude that it was an abuse of discretion to find that the suit may not proceed in UT’s absence. Accordingly, we reverse the district court on this point.

Gensetix provides some guidance when licensing from an arm of the state government. To be able to suit without joint the patent owner, the licensee should make sure that their license is exclusive, in all fields, and that the licensee can enforce the patent, and patent owner cannot bring suit once the licensee does. This should tip the balance of the FRCP 19(b) factors in favor of the licensee enforcing the patent.

PTAB is not Limited to § 102 and § 103 when Reviewing Amended Claims in IPR

In Uniloc 2017 LLC v. Hulu, LLC, [2019-1686] (July 22, 2020) the Federal Circuit affirmed the PTAB’s denial of Uniloc 2017’s motion to amend on the grounds that the substitute claims were unpatentable under 35 USC 101.

During an IPR the patent owner may file one motion to amend the patent, canceling any challenged patent claim and for each challenged claim, proposing a reasonable number of substitute claims. § 316(d)(1). At the conclusion of the IPR, the Director shall issue and publish a certificate incorporating in the patent by operation of the certificate any new or amended claim determined to be patentable. § 318(b).

In its Final Written Decision, the PTAB, in addition to explaining why the challenged original claims are unpatentable, denied Uniloc’s Motion to Amend the claims, concluding that Hulu had shown by a preponderance of the evidence that the Substitute Claims are directed to non-statutory subject matter under 35 U.S.C. § 101. Ineligibility was the sole ground on which the PTAB denied the motion to amend.

Rejecting the argument that the case was moot, the Federal Circuit considered PTAB authority to consider § 101 eligibility for proposed
substitute claims, concluding that the PTAB was authorized by statute to assess Uniloc’s proposed Substitute Claims for eligibility under § 101 and,
finding the claims ineligible, to deny the motion to amend.

Uniloc argued that the PTAB was limited in its review of proposed
substitute claims to anticipation or obviousness, as provided by § 311(b). However the Federal Circuit found that the PTAB correctly concluded that it is not limited by § 311(b) in its review of proposed substitute claims in an
IPR, and that it may consider § 101 eligibility. The Federal Circuit said that this determination was supported by the text, structure, and history of
the IPR Statutes, which indicate Congress’s unambiguous intent to permit the PTAB to review proposed substitute claims more broadly than those bases provided in § 311(b).

The Federal Circuit said that the IPR Statutes plainly and repeatedly require the PTAB to determine the “patentability” of proposed substitute claims. The Federal Circuit said that Congress did not intend §311 to constrain the PTAB’s review of proposed substitute claims to anticipation and obviousness, pursuant to § 102 and § 103, because §311 is confined to the review of existing patent claims, not proposed ones. The Federal Circuit said that the structure and legislative history of the IPR Statutes support this conclusion, as section 311 applies to the petition phase of the proceedings, and not to a separate adjudication-stage provision, such as § 316. Finally, the Federal Circuit found support in the IPR statute’s legislative history.

The Federal Circuit concluded that the PTAB can consider §101 when considering amended or substitute claims in an IPR (and no doubt §112 as well).

Licensee’s Failure to Mark Ruined Patent Owner’s Claim for $3.5 Million in Pre-Suit Damages

In Packet Intelligence, LLC v. NetScout Systems, Inc. [2019-2041] (July 14, 2020), the Federal Circuit reversed the district court’s award of $3.5 million in pre-suit damages, vacated the court’s enhancement of that award, but affirmed the district court’s judgment in all other respects.

The Federal Circuit noted that an alleged infringer bears an initial burden of production to articulate the products it believes are unmarked patented articles subject to the marking requirement. This initial burden is a “low bar” and that the alleged infringer needed only to put the patentee on notice that certain licensees sold specific unmarked products that the alleged infringer believes practice the pa-tent. The burden then falss on the patentee to prove that the identified products do not practice the patent-at-issue.

NetScout argued that Packet Intelligence is not entitled to pre-suit damages because it failed to prove that MeterFlow, an unmarked product of Packet Intelligence’s licensee, did not practice the patent. The Federal Circuit agreed that under the standard articulated in Arctic Cat, Packet Intelligence bore the burden of proving that MeterFlow product identifed by NetScout did not practice at least one claim of the patent. Because Packet Intelligence failed to present substantial evidence to the jury that matched the limitations in any claim of the patent to the features of the Meter-Flow product, NetScout is entitled to judgment as a matter of law that it is not liable for pre-suit damages based on infringement of the patent.

Packet Intelligence further argued that the two method patents, which are not subject to the marking requirement, would alternatively support the award of pre-suit damages. However the Federal Circuit disagreed, noting that method claims are not directly infringed by the mere sale of an apparatus capable of performing the claimed process. Thus Packet Intelligence could not simply count sales of the software accused of infringing the ’789 patent as sales of the method claimed in the ’725 and ’751 patents. Instead, Packet Intelligence was required to produce evidence that the claimed method was actually used and hence infringed. The Federal Circuit rejected Packet Intelligence’s efforts to show that NetScout’s internal use justified the entire damage award, noting that the damages base was not tailored to any alleged internal use of the claimed methods.

Patent owners should police the marking by their licensees, and remember to always completely prove their entitlement to damages when challenged by the accused infringer.

Collaboration and Concerted Effort are What Result in Joint Inventorship

In Dana-Farber Cancer Institute, Inc., v. Ono Pharmaceutical Co., [2019-2050] (July 14, 2020), the Federal Circuit affirmed the district court determination that Dr. Gordon Freeman and Dr. Clive Wood be added to U.S. Patent Nos. 7,595,048, 8,168,179, 8,728,474, 9,067,999, and 9,402,899.

The appeal relates to an inventorship dispute over groundbreaking work in the field of cancer treatment. Each patent at issue claims a method of treating cancer by administering antibodies targeting specific receptor-ligand interactions on T cells. Ono challenges the district court’s decision on two bases: (1) the district court’s legal analysis of conception, and (2) the district court’s factual findings regarding inventorship. We address each argument in turn.

The Federal Circuit explained that a joint invention is simply the product of a collaboration between two or more persons working together to solve the problem addressed. To be a joint inventor, one must: (1) contribute in some significant manner to the conception or reduction to practice of the invention, (2) make a contribution to the claimed invention that is not insignificant in quality, when that contribution is measured against the dimension of the full invention, and (3) do more than merely explain to the real inventors well-known concepts and/or the current state of the art.

There is no explicit lower limit on the quantum or quality of inventive contribution required for a person to qualify as a joint inventor. People may be joint inventors even though they do not physically work on the invention together or at the same time, and even though each does not make the same type or amount of contribution.

The Federal Circuit noted that conception is the touchstone of the joint inventorship inquiry, and conception is complete when an idea is definite and permanent enough that one of skill in the art could understand the invention. An inventor need not know, however, that an invention will work for its intended purpose in order for conception to be complete, as verification that an invention actually works is part of its reduction to practice.

The Federal Circuit refused to adopt a rule that research made public before the date of conception of a total invention cannot qualify as a significant contribution to conception of the total invention. Such a rule would ignore the realities of collaboration, especially that collaboration generally spans a period of time and may involve multiple contributions. It is certainly true that simply informing another about the state of the prior art does not make one a joint inventor. Collaboration and concerted effort are what result in joint inventorship, but a collaborative enterprise is not negated by a joint inventor disclosing ideas less than the total invention to others.

The Federal Circuit went on to reject a series of challenges to the district court’s factual analysis for each patent, and concluded that Freeman and Wood were co-inventors, and affirmed the district court

Over-designation of Confidential Information Costs Plaintiff Protection

In Uniloc 2017 LLC v. Apple, Inc., [2019-1922, 2019-1923, 2019-1925, 2019-1926] (July 9, 2020), the Federal Circuit affirmed in part, vacated in part, and remanded, the district court’s denial of Uniloc’s motion to seal.

Uniloc asked the district court to seal most of the materials in the parties’ underlying briefs, including citations to case law and quotations from published opinions. It also requested that the court seal twenty-three exhibits in their entireties. These exhibits included matters of public record, such as a list of Uniloc’s active patent cases.

The Federal Circuit began by pointing to the strong presumption in favor of access to documents filed with a court. The Federal Circuit sorted the motions to seal into two groups: (1) documents with Uniloc’s own purportedly confidential and/or sensitive information and that of its related entities; and (2) documents with purportedly confidential and/or sensitive information of third parties.

As to Uniloc’s information, the Federal Circuit found that because Uniloc failed to comply with local rules setting out the standards for filing documents under seal, and requesting reconsideration, the district court did not abuse its discretion in denying Uniloc’s motions to seal its purportedly confidential information and that of its related entities.

As to third party information, the Federal Circuit noted that the third parties third parties were not responsible for Uniloc’s filing of an overbroad sealing request, and required independent analysis. The Federal Circuit concluded that the district court failed to make findings sufficient to allow it to adequately assess whether it properly balanced the public’s right of access against the interests of the third parties in shielding their financial and licensing information from public view, and vacated and remanded for the district court to consider in the first instance.

Litigants with confidential information should realistically evaluate the information, and only attempt protect genuinely confidential information, and comply with all of the court’s. It is a mistake to assume that the court will give free rein to designate information as confidential.

Board Should Fix Obvious Claim Errors in Order to Make a Decision on the Merits

In Fitbit, Inc. v. Valencell, Inc., [2019-1048] (July 8, 2020), the Federal Circuit vacated the PTAB decision that Claims 3-5 of U.S. Patent No. 8,923,941 were not unpatentable on a method of generating data output containing physiological and motion-related information.

The Board held that claim 3 is not unpatentable, based solely on the Board’s rejection of Fitbit’s proposed construction of the term “application-specific interface (API).” The Board did not review patentability of claim 3 on the asserted grounds of obviousness.

The Federal Circuit agreed with the Board’ s construction, rejecting Fitbit’s broader construction. The Federal Circuit observed however that the difference between an application-specific interface and an application programming interface may have no significance.

The Board did not review the patentability of claim 3, as construed, on the asserted grounds of obviousness. The Board held that, by rejecting Fitbit’s position on the meaning of “application-specific interface (API),” the patentability inquiry ended, and by Final Written Decision the Board held claim 3 not unpatentable.

The Federal Circuit held that the Board erred in holding that since it did not adopt Fitbit’s claim construction, that decided the question of patentability. It was improper to hold claim 3 “not unpatentable” by Final Written Decision, without determination of the asserted grounds of obviousness.

As to claims 4 and 5, the Board held claims 4 and 5 not unpatentable in its Final Written Decision, on the ground that the Board could not determine the meaning of the claims because the term “the application” lacked antecedent basis. The Board did not apply the cited prior art references, on which there were evidence and argument, instead stating that the meaning of the claims were “speculative.”

Both parties agreed that the lack of antecedent basis arose from an error in renumbering the claims, which the Board refused to correct. The Federal Circuit said that although the Board states that the intended meaning of the claims is “subject to reasonable debate,” it perceived no debate. Rather, the parties to this proceeding agree as to the error and its correction. The Board erred in declining to accept the parties’ uniform position and correct the error that claim 4 depend from claim 3. With this correction, the rejection of claims 4 and 5 for absence of antecedent basis for “the application” dis-appears.

The Federal Circuit concluded that the Agency’s treatment of this error as the basis of a Final Written Decision of patentability is not a reasonable resolution, and does not comport with the Agency’s assignment to resolve patentability issues.

The Federal Circuit has previously pressed the PTAB to reach a decision even where the claims were difficult to construe. Here the Court went further to require the Board to fix obvious defects in the claims rather than avoid reaching a decision on the merits.

42 U.S.C. § 262(l)(8) Simply Requires 180 Day Notice before Sale of a Biosimilar Product

In Genentech, Inc. v. Immunex Rhode Island Corp., [2019-2155] (July 6, 2020), the Federal Circuit affirmed the denial of Genentech’s motion for a TRO based upon Immunex Rhode Island Corporation’s and Amgen Inc.’s (collectively, Amgen) alleged failure to comply with the notice requirement of 42 U.S.C. § 262(l)(8)(A).

On October 6, 2017, Amgen sent a letter pursuant to 42 U.S.C. § 262(l)(8)(A) notifying Genentech of its intent to commercially market Mvasi — a biosimilar version of Avastin — starting no earlier than 180 days from the date of the letter. In August 2018, after two prior supplements, Amgen filed a third sup-plement to its Mvasi application to add a manufacturing facility and a fourth supplement to change its drug label. By July 8, 2019, Amgen decided it would commercially launch Mvasi, intending to market it immediately.

Genentech filed two motions i seeking to preclude Amgen from commercially marketing Mvasi until such time as Amgen provides notice of its intent to commercially market such product pursuant to 42 U.S.C. § 262(l)(8) and 180 days have elapsed. Genentech argued that Amgen’s third and fourth supplements resulted in new and distinct applications that require new notices under Section 262(l)(8)(A). The district court denied both motions, reasoning that Amgen’s October 2017 commercial marketing notice for Mvasi satisfied Section 262(l)(8)(A)’s notice requirements, and Genentech appealed.

The Federal Circuit said that the statute makes clear that the biosimilar applicant must provide notice to the reference product sponsor prior to commercially marketing the biological product. Section 262(l)(8)(A) expressly requires prior notice regarding commercial marketing of the “biological product,” the definition of which makes no reference to licensing under Section 262(k). Section 262(l)(8)(A) relates to timing. The Federal Circuit said this interpretation is consistent with the Supreme Court’s decision in Sandoz Inc. v. Amgen Inc., 137 S. Ct. 1664 (2017).

The Federal Circuit concluded that Amgen’s October 6, 2017, letter, which notified Genentech of Amgen’s intent to commercially market Mvasi at least 180 days before its July 2019 launch, satisfied Section 262(l)(8)(A), and affirmed the district court.

Past History is as Relevant as Current Conduct in Attorneys’ Fee Award

In Electronic Communication Technologies, LLC v. SHOPPERSCHOICE.COM, LLC, [2019-2087] (July 1, 2020) the Federal Circuit vacated and remanded the district court’s denial of an award of defendant’s attorneys’ fees.

After its motion for judgment on the pleadings that the asserted claim of U.S. Patent No. 9,373,261 was not patent eligible, defendant filed a motion for an award of its attorneys fees. In “considering the totality of the circumstances,” the District Court determined the case was not exceptional, citing the Lanham Act, 15 U.S.C. § 1117), and denied the motion.

The Federal Circuit agreed with defendant that the district court abused its discretion in weighing relevant factors, and by applying the incorrect attorney fee statute. The Federal Circuit held that the District Court clearly erred by failing to address ECT’s manner of litigation and the broader context of ECT’s lawsuit against ShoppersChoice. The Federal Circuit pointed out that there was evidence that ECT sent standardized demand letters and filed repeat patent infringement actions to obtain low-value “license fees” and forcing settlements, and that ECT, under its former name Eclipse, filed lawsuits against at least 150 defendants, alleging infringement of claims in the ’261 patent and in other patents in the ’261 patent’s family. ECT’s demand for a low-value settlement—ranging from $15,000 to $30,000—and subsequent steps—such as failure to proceed in litigation past claim construction hearings—indicates the use of litigation to achieve a quick settlement with no intention of testing the strength of the patent or its allegations of infringement. The Federal Circuit also pointed to a prior California district court decision awarding attorneys fees against ECT, for its in terrorem enforcement tactics, and the fact that the principals of ECT where also associated with “one of the most prolific” non-practicing entity plaintiffs in the United States.

The Federal Circuit complained that there was no mention of the manner in which ECT litigated the case or its broader litigation conduct, saying “[s]Such conduct is a relevant consideration.” While a district court need not reveal its assessment of every consideration of § 285 motions, it must actually assess the totality of the circumstances, and by not addressing the adequate evidence of an abusive pattern of ECT’s litigation, the District Court failed to conduct an adequate inquiry and so abused its discretion. The Federal Circuit instructed that a pattern of litigation abuses characterized by the repeated filing of patent infringement actions for the sole purpose of forcing settlements, with no intention of testing the merits of one’s claims, is relevant to a district court’s exceptional case determination under § 285.

The Federal Circuit also said that the district court failed to sufficiently address the objective weakness of Claim 11.

The Federal Circuit vacated and remanded the case for the district court to consider, in a manner consistent with its opinion, ECT’s manner of litigation and the objective unreasonableness of ECT’s infringement claims, and further reference the correct attorneys’ fees provision (35 U.S.C. § 285), rather than the parallel statute for trademark cases (15 U.S.C. § 1117).